Florida Business Litigation: “Explaining the Uniform Commercial Code”—Myth 1: The U.C.C. Only Applies to Merchants

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Florida Business Litigation: “Explaining the Uniform Commercial Code”—Myth 1: The U.C.C. Only Applies to Merchants

May 10, 2018

By: The Carlin Law Firm, PLLC

As Fort Lauderdale business litigation lawyers, we frequently deal with contracts pertaining to the sale of goods.  Outside of the legal profession, it is a common misconception that a contract for the sale of goods is subject to the same rules that would govern any other contract.  However, unlike a contract for services or for the sale of real estate, which is governed by common law (i.e., case law decided within the court system), contracts that deal with the sale of goods are governed by statutory law, specifically, Article 2 of the Uniform Commercial Code (the “U.C.C.”).  Accordingly, there are several myths about the U.C.C.

Myth 1: The U.C.C. Only Applies to Merchants

Article 2 of the U.C.C. applies to the sale of goods, without any consideration given to whether the parties are merchants.  See U.C.C. § 1-102 (“Unless the context otherwise requires, this Article applies to transactions in goods.”).  However, there are actually fourteen sections within Article 2 that apply a stricter standard of conduct when one of the parties to the contract is a merchant.  See U.C.C. §§ 2-103(1)(b); 2-205; 2-207(2); 2-209(2); 3-312(3); 2-314; 2-327(1)(c); 2-402(2); 2-403(2); 2-509(3); 2-603(1); 2-605(1)(b); 2-609(2).

The U.C.C. defines a merchant as “a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction . . . .” U.C.C. § 2-104(1).  While courts have disagreed over the years as to whom the merchant rule applies, an individual questioning his or her status as a merchant might potentially want to err on the side of caution and apply the higher U.C.C. standard to their actions in business dealings.  However, it is possible for a potential merchant to, at the very least, narrow those portions of the U.C.C. that might apply to them.

A person questioning their status as a merchant may consider Comment 2 of Section 2-104(1) of the U.C.C.  Comment 2 groups all sections that apply to merchants into three categories.  The first group of applicable sections bases the status of merchant on the person’s specialized knowledge of business practices in that area.  This group includes Section 2-103(1)(b), dealing with the requirement of “good faith”; Section 2-509, dealing with risk of loss; Section 2-609, dealing with adequate assurances of performance; and Sections 2-327(1)(c), 2-603, and 2-605, all dealing with a merchant’s responsibility to adhere to a seller’s instructions.

The second group of applicable sections concerns the merchant’s specialized knowledge of the goods they are in the business of selling.  This group includes Section 2-314, dealing with the warranty of merchantability; Section 2-402(2), allowing the retention of possession of the goods by a merchant-seller; and Section 2-403(2) dealing with the entrustment of possession of a good to a merchant dealing in that type of good.  Finally, the third group includes those sections of the U.C.C. that are more general in nature—i.e., any one determined to be a merchant under the first two groups.  This third group includes Section 2-201(2), dealing with written confirmations; Section 2-205, dealing with firm offers; Section 2-207, determining additional terms; and Section 2-209 dealing with modifications, rescission and waivers.

As illustrated above, the merchant rule is only one of many, sometimes complicated rules of the Uniform Commercial Code.  When dealing with a dispute over the sale or purchase of a particular good, it is important to find a lawyer who is familiar with, and experienced in, litigating disputes involving Article 2 of the Uniform Commercial Code.  If you’re in doubt about your rights or need representation relating to a contract involving the sale of goods, contact a Fort Lauderdale contract lawyer at (954) 440-0901 to assist you with your dispute.  The Fort Lauderdale business lawyers at The Carlin Law Firm, PLLC regularly represent employers and businesses with prosecuting and defending breach of contract claims involving the sale of goods.

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